Hello everyone, welcome to BudgetHolics. Here's a short overview of what's happened with Coinbase since their DPO, some Price targets and Growth prospects.
Since it went public, Coinbase (COIN) stock has dropped by 20%. This begs the question: Is COIN a good buy, or was it an overhyped company with little to no value? To answer this question, we'll look into what are the growth prospects for the company, what are investors saying about the company, and what are some price targets we can look forward to.
On an Bloomberg Interview, a few hours before the DPO, Cathie Wood argued that Coinbase is a great company. She stated that she expects a high amount of volatility, as is the case with Bitcoin and other cryptocurrencies, but she will take advantage of this volatility, buying the dip whenever possible. Wood also underlined that a $500k bitcoin price target is possible, with just a 5% asset allocation by S&P 500 companies, which would boost COIN's price. The reason, according to Wood, institutional investors are increasingly looking into cryptocurrencies, and BTC in particular, is its low correlation with other assets, such as Equities and Real Estate. Although ARK Invest's CIO didn't give a specific price target, she said she expects Coinbase to perform way above ARK's minimum hurdle rate of return of 15% per annum. In terms of competition, although other exchanges are expected to force Coinbase to lower their margins, she believes that institutional clients and subscription revenues will make up for it. Lastly, Wood mentioned that analysts cannot yet properly analyze and price the company, as it is a novel type of business.
Institutional interest in Bitcoin and Coinbase has indeed spiked. The company announced that it "was selected as the primary execution partner by MicroStrategy". According to a Block article, there is speculation that "Coinbase was behind Tesla’s bitcoin buy". This speculation is further supported by the exchange of Tweets between Elon Musk, Tesla's CEO and the CEO of MicroStrategy, Michael Saylor. Tesla's announcement of $100 million profit from Bitcoin sale on Monday will surely further incentivize Institutional Investors to look into allocating a percentage of their balance sheet into bitcoin, some of whom will chose to do so via Coinbase.
In terms of price targets, according to a Fortune article, DA Davidson's Gil Luria has set a price target of $650/share. He describes Coinbase as a diversified ETF for crypto assets, however, he also underlines some of the risks of investing into Coinbase, such as Crypto volatility, the threat of being hacked and increasing competition, forcing them to reduce their margins. BTIG's Mark Palmer has set a more moderate price target of $500/share, underlining that Coinbase is expected to diversify their revenue stream by leveraging their robust platform for institutional investors.
Although Cathie Wood has not publicly disclosed a price target, ARK invest bought COIN for 8 consecutive days, with a position of 1.746 million shares.
According to Yahoo Finance, COIN is a Buy, with the stock trading below the Average Analysts' price targets.
I'd love to hear your thoughts on Coinbase, your buying strategy and your price targets down in the comments.